Shares in China Mobile, the world's biggest wireless carrier, slid after a Goldman Sachs downgrade while telecoms gear provider ZTE  climbed on Monday in the wake of a radical industry overhaul unveiled over the weekend.

Beijing unveiled initial details of a controversial sector revamp on Friday and Saturday after years of speculation, in which the nation's carriers will be folded into three full-service operators and win third-generation licenses. [ID:nSHA179922]

China Mobile, which for years enjoyed a near-unassailable two-thirds share of the world's largest telecoms market, now faces competition from two strengthened players instead of just current sole rival China Unicom.

A rollout of 3G, which allows faster wireless Web access and a host of multimedia content, will also entail spending on networks, potentially benefiting international players from the likes of Motorola and Ericsson to Nokia and Siemens, but also local players Huawei and ZTE Corp.

By 0415 GMT, shares in China Mobile were down 7.5 percent. Goldman Sachs downgraded China Mobile stock to sell from neutral on Monday. Other analysts warned that the firm's dominance of the market would come under attack.

China Mobile "is uniquely well-prepared to face competition, having done operational and financial planning for years and boasting a huge headstart," Goldman's Helen Zhu wrote.

"However, it looks also to be heading into a uniquely unfavourable regulatory regime, with policies like inter-operator roaming seriously threatening its many advantages." 

ZTE Corp, China's No. 2 provider of equipment to the industry, climbed as much as 8.2 percent but backtracked and stood 4.2 percent higher at midday. Its stock in Shenzhen 000063.SZ gained a more modest 1.4 percent.

Shares in Unicom, as well as fixed-line carriers China Telecom and its smaller rival China Netcom, were suspended from Friday and executives and analysts say they will remain untraded for a few days yet.

Netcom said on Monday that its stock would remain suspended pending an announcement of "material transactions", without saying when that might take place.

The government's restructuring blueprint calls for three 3G licences and a merger of Unicom and Netcom.

ZTE now commands 40 percent of the market for China's homegrown third-generation technology, known as TD-SCDMA or Time Division Synchronous Code Division Multiple Access, according to Citigroup analyst Jim Liang.

At least one of the three eventual service providers will have to build up that network. Plus, ZTE has strong existing ties to Unicom that it could leverage in any network rollout, he said.

The government will also call on China Telecom, the country's biggest fixed-line telecoms carrier, to buy Unicom's Code Division Multiple Access or CDMA network, fleshing out details after an initial announcement on Friday.

ABN AMRO has valued that Unicom  network at HK$40 billion ($5.1 billion). 

China's 1.3 billion people can now look forward to joining others in advanced economies who already enjoy blazing-fast Internet access, games and a host of multimedia content from maps to music on their cellphones.

Though analysts are quick to point out that a full launch of 3G services is years away, allowing three nationwide providers increases choice and promises to hold down user fees.

On a corporate level, it will also help address the perennial complaints of fixed-line firms at being left out of the world's largest and fastest-growing major telecoms market. Analysts say heightened competition would in theory benefit users by also enhancing service and content quality.

It remains to be seen how China Mobile, which is absorbing fixed-line player Railcom to get into the slower-growing business, will tackle the impending competition.

"While the exact timing and implementation details for these policies are not known yet, we believe they will filter out piece by piece over the coming quarters, posing a dramatic and extended overhang" on China Mobile stock, Goldman's Zhu said.

"We cut our estimates to reflect rising threats -- with longer term ARPU (average revenue per user) and margin erosion." ($1=HK$7.801)